UMA is a decentralized platform for the creation, maintenance, and settlement of “priceless” financial contracts on Ethereum. The system consists of priceless financial contract designs and a decentralized oracle mechanism. The UMA protocol enables any two counterparties to design and enter their own custom made financial contract.

Ben Strack

As traditional finance players continue wading deeper into the crypto space, Brazil could serve as a “proof of concept” for such integrations.



Brazil bank Itau Unibanco launched crypto trading, Reuters reported Monday. A spokesperson for the company did not immediately return a request for comment.&nbsp;



The reported move signals “a clear demand from clients” and marks the ongoing crypto initiatives by major banks in the country, said Pedro Lapenta, head of research at crypto asset manager Hashdex.



Nubank, for example, launched crypto trading in May 2022 — <a href="https://international.nubank.com.br/consumers/nubank-cripto-adds-ten-new-cryptocurrency-options-in-less-than-1-year/">adding</a> access to polkadot (DOT), avalanche (AVAX), stella lumens (XLM), arbitrum (ARB) and optimism (OP) last month. The company <a href="https://twitter.com/jerallaire/status/1732111464243106078?s=46&amp;t=yjAdM2ddX0KgGQimu7jcDQ">partnered</a> with stablecoin issuer Circle Tuesday to extend USDC exposure to Brazilian Nubank customers.&nbsp;



“To anticipate how the convergence of traditional and crypto markets will unfold, it seems appropriate to consider Brazil as one of the most advanced countries, and perhaps the primary case to observe in the next one to two years,” Lapenta told Blockworks.



Read more: <a href="https://blockworks.co/news/real-world-assets-tradfi-defi-tokenization">TradFi, DeFi convergence continues through tokenizing real-world assets</a>



He noted the Brazil central bank’s efforts in developing its Digital Brazilian Real, or Drex. &nbsp;&nbsp;



The country’s securities regulator in 2021 <a href="https://blockworks.co/news/brazil-bitcoin-etf-follows-similar-launches-in-canada">approved Brazil’s first bitcoin ETF</a> — a type of fund the US Securities and Exchange Commission has never allowed to come to market.&nbsp;&nbsp;&nbsp;



“It is reasonable to envision that, similar to the way we observed with the <a href="https://www.bcb.gov.br/en/financialstability/pix_en">Pix</a> in the payment sector, Brazil could serve as a proof of concept for the seamless integration between traditional finance and crypto, potentially offering valuable insights for the global economy,” Lapenta added.



Itau Unibanco’s trading service is initially set to be limited to bitcoin and ether, Reuters <a href="https://www.reuters.com/technology/brazilian-lender-itau-launches-crypto-trading-2023-12-04/">reported</a>.



Rather than trying to compete with centralized exchanges such as Binance, Itau is likely more focused on adding an extra option for existing clients, market observers said.&nbsp;&nbsp;



<h2 class="wp-block-heading">Reflecting a broader theme</h2>



The new way to trade crypto in Brazil reflects a broader trend gaining steam globally.



“Itau Unibanco launching crypto trading and custody services confirms the thesis we have had throughout 2023: Traditional organizations are building the rails to enter the digital asset ecosystem, right now,” said Caspar Sauter, co-founder of decentralized exchange D8X. “From Brazil to Switzerland, we have seen multiple banks entering the space over the last months.”



Switzerland-based St.Galler Kantonalbank launched bitcoin and ether custody and trading services to certain clients via a link-up with AMINA Bank (formerly known as SEBA Bank).



Sauter noted that he expects more traditional banks to start offering crypto-related services, with a focus first on custody and trading.&nbsp;



“Instead of developing in-house solutions, they will leverage white-label products offered by players such as Amina Bank, Sygnum Bank or AlphaPoint,” he told Blockworks. “Ultimately those banks will also build rails to the DeFi ecosystem, which is what we at D8X are banking on.”



Sauter said large banks in Europe will follow soon, but added those in the US could lag behind considering the country’s current regulatory environment.



Still, some have already taken steps.&nbsp;



Germany-based Deutsche Bank said in September it was <a href="https://blockworks.co/news/deutsche-bank-crypto-custody-tokenization">set to establish digital asset custody and tokenization services</a> by teaming up with crypto infrastructure firm Taurus.



In the US, financial services giant Fidelity Investments <a href="https://www.cnbc.com/2022/11/03/fidelity-to-open-commission-free-crypto-trading-to-retail-investors.html">launched</a> a crypto trading product for retail investors in 2022. The country’s oldest bank, BNY Mellon, has expressed its <a href="https://blockworks.co/news/bny-mellon-crypto-plans">long-term focus on digital innovation</a>.



JPMorgan has explored various tokenization and blockchain initiatives for several years — recently <a href="https://blockworks.co/news/blackrock-barclays-jpmorgan-chase-dapp-tcn">facilitating a collateral transaction between BlackRock and Barclays</a> via a decentralized application.



“We maintain a positive outlook on the consistent trend of [traditional finance] incorporating crypto and blockchain technology into their products and infrastructure,” Lapenta said. “We&#8217;re also cautiously optimistic about how this movement will eventually translate into positive price action in the crypto market.”



Bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) price was roughly $43,750 at 4 pm ET Tuesday — about 14% higher than seven days ago and up nearly 5% in the last 24 hours.



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How a Brazilian banking giant’s latest move reflects the ongoing TradFi-crypto convergence

Jack Kubinec

Jack Harlow concert-goers scanned QR codes on their phones before entering the multi-platinum rapper’s show on Monday in Lexington, KY.&nbsp;



What they may not have known was how their entry had been facilitated by blockchain tech.



MITH is a Polygon-based fan engagement startup that partnered with Harlow to offer on-chain VIP tickets for the rapper’s recent mini-tour in Kentucky. The company created on-chain records of attendance at the shows, but its founders told Blockworks they are taking a “mullet” approach to get users on board — Web2 in the front, Web3 in the back.&nbsp;



In the future, MITH will launch platforms for creatives to monetize fan interactions and for fans to accrue rewards and collectibles — with the on-chain pieces happening behind the scenes.&nbsp;



Incubated by Range Media Partners in 2022, MITH came out of stealth in late November after Jack Harlow <a href="https://x.com/OnlywithMITH/status/1726686109038756081?s=20">debuted</a> his MITH-powered website where fans could purchase premium experience tickets for his upcoming slate of shows.&nbsp;



Read more: <a href="https://blockworks.co/news/uk-sports-committee-football-nfts">UK sports committee wants football to tackle fan tokens, NFTs</a>



MITH validated the tickets with <a href="https://pitch.com/v/tokenproofoverview-dc3gnt/1090d4eb-a158-4836-a3b3-7e620e7db02b">Tokenproof</a>, an on-chain ticketing protocol, so fans had the option to add their ticket to a crypto wallet but only needed to scan a QR code to enter. 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Check in for Private Garden members for the last stop on the No Place Like Home Tour &#8211; smooooth thanks to our friends at <a href="https://twitter.com/tokenproof?ref_src=twsrc%5Etfw">@tokenproof</a> <a href="https://t.co/YPuByo4eqh">pic.twitter.com/YPuByo4eqh</a>&mdash; MITH (@OnlywithMITH) <a href="https://twitter.com/OnlywithMITH/status/1731444759770661318?ref_src=twsrc%5Etfw">December 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



MITH didn’t pay Harlow for his use of the platform, the company’s co-founders told Blockworks, saying he “wanted to advise on the future” of the product and “have upside.”&nbsp;



Soon after Harlow’s website went up, Axios <a href="https://www.axios.com/pro/media-deals/2023/11/30/mith-fan-platform-jack-harlow">reported</a> that MITH raised $3.5 million in seed funding with participation from Warner Music Group, Winklevoss Capital and the NEAR Foundation, among others.&nbsp;



MITH initially built a more complex platform for Harlow before the rapper asked the company to scale back the “Private Garden” <a href="https://www.privategarden.us/">website</a> to focus just on tickets, Sanchez said.&nbsp;



A demo of the scrapped site, which is more in line with MITH’s broader vision for the platform, shows a place for Harlow or other creators to make membership tiers. Creators could gate live streams or chat rooms depending on how much fans pay, for instance. Purchasing behavior and fan engagements all go on-chain, but the platform otherwise bears a Web2 look.



“Jack is creating <a href="https://blockworks.co/tag/smart-contracts">smart contracts</a> back here without even knowing it,” Sanchez said of the tiered membership site.&nbsp;



MITH has a post-FTX sensibility, co-founder Matty Ayers said, focusing on the technological possibilities unlocked by blockchain without letting lay perceptions of crypto scare users off. 



Read more: <a href="https://blockworks.co/news/sports-fan-token-launch-socios">Pro sports teams piling on to Chiliz fan token opportunities</a>



“We create a wallet for you, and we don’t even tell you,” Ayers said. “If you focus on ‘wallet,’ that has a certain feeling. If you focus on ‘account,’ like this is my profile, it’s a completely different feeling.”



Emilia Clarke and Halle Berry are currently advisors to the project alongside Harlow, and Sanchez said MITH plans to open up “self-serve” to more creators in the first half of 2024. Ayers said MITH is also working on “co-creation” where fans can create derivative works started by popular creatives, and monetization and intellectual property rights are handled via blockchain.&nbsp;



MITH’s founders believe the best uses of blockchain tech for fan engagement will ultimately emerge down the road.



“We&#8217;re meeting with some heavy hitters in the digital identity space that are tied to [<a href="https://blockworks.co/tag/layer-1">layer-1s</a>] and we&#8217;re saying, ‘are you guys going to jump into the future with us?’ It&#8217;s not gonna be about speculative assets. It&#8217;s gonna be about participation and playing in a playground and testing tools and assumptions,” Ayers said.



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How MITH brought Jack Harlow fans to the blockchain

Katherine Ross

The Securities and Exchange Commission is asking Judge Jed Rakoff to rule on whether or not Terraform offered and sold unregistered securities.&nbsp;



The SEC, in its <a href="https://blockworks.co/news/terraform-labs-do-kwon-sec-lawsuit">case against Terraform Labs and former CEO Do Kwon</a>, is making the request to prevent a jury from making a decision on the alleged securities.



The issue at hand, lawyers for the regulatory agency wrote, is a legal question that requires court determination, and is not “a factual question for the jury.”



“There is no dispute, for example, as to any of the facts that establish that Defendants’ crypto asset offerings involved an investment of money, in a common enterprise, with an expectation of profit to be derived from Defendants’ efforts,”&nbsp; the SEC wrote in the Dec. 4 filing.



“Whether Defendants’ offers and sales of their crypto assets are investments contracts is thus a question of law for the Court, not the jury.”



The SEC goes on to claim that Terra, in its opposition filing to the SEC’s motion for summary judgment, failed to raise issue with the SEC’s allegations that Terra sold and offered unregistered securities in the form of crypto.



Lawyers for the commission believe that the “undisputed facts” they’ve put forward in former filings are enough to “satisfy the governing legal standard” and therefore are enough for Judge Rakoff to rule on.



The case is “straightforward,” the SEC claims and therefore Rakoff should be able to grant a summary judgment — which is “routinely” done in “such circumstances.”



A <a href="https://blockworks.co/news/judge-rules-ripple-xrp-not-security">summary judgment was granted</a> in another crypto case this summer: the SEC’s case against Ripple. However, the outcome was not fully in favor of the regulatory agency.&nbsp;



Instead, Judge Analisa Torres — a district court judge for the Southern District of New York — ruled that programmatic sales of Ripple’s XRP didn’t pass the Howey test. Institutional sales, she ruled, constituted an unregistered securities offering.&nbsp;&nbsp;



Rakoff, also a district judge for the Southern District of New York, didn’t seem to agree with the Torres ruling earlier this summer when <a href="https://blockworks.co/news/terraform-lawyers-use-ripple-ruling-dismiss-suit">Terraform attempted to use the ruling</a> to get its case dismissed.&nbsp;



Rakoff, in his denial, said that the <a href="https://blockworks.co/news/judge-denies-terraform-motion-dismisshttps://blockworks.co/news/judge-denies-terraform-motion-dismiss">Ripple and Terraform cases are separate</a>, in part due to the SEC’s allegations that Terraform “had the motive to mislead investors about the utility of their crypto-assets” were upheld due to the evidence provided by the Commission.



Rakoff’s <a href="https://blockworks.co/news/terraform-labs-opinion-ripple">opinion also plainly stated that his court</a> “rejects the approach recently adopted by another judge of this District in a similar case,” citing the SEC’s case against Ripple.



Howey, he said, does not make a distinction between institutions that buy crypto or those who purchased the assets via secondary transactions.&nbsp;



“That a purchaser bought the coins directly from the defendants or, instead, in a secondary resale transaction has no impact on whether a reasonable individual would objectively view the defendants’ actions and statements as evincing a promise of profits based on their efforts,” Rakoff wrote in late July.



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SEC wants judge overseeing Terraform case to rule on securities claims

Fresh off the close of its merger with US Bitcoin Corp., crypto mining firm Hut 8 is looking to boost its standing in the growing artificial intelligence (AI) infrastructure and computing markets.&nbsp;



Hut 8 Chief Strategy Officer Mike Ho said on a Monday call with analysts that the firm is currently positioned to meet demand for high-density data center infrastructure. It is actively seeking additional opportunities to invest in “the immense growth potential of AI,” he added.&nbsp;



The company’s stock price was up about 15% on the day, as of 12:30 pm ET Tuesday.



Hut 8’s ongoing focus on the evolving segments comes after Hut 8 acquired five Canada-based data centers in early 2022 through its buy of wireless connectivity company TerraGo.&nbsp;



Its plan was to use the data centers’ unused cloud space for gaming rendering, NFT storage, node infrastructure management and general storage for exchanges.



Read more: <a href="https://blockworks.co/news/bitcoin-miner-targets-gaming-web3-with-cloud-services-expansion">Bitcoin miner targets gaming, Web3 with cloud services expansion</a>



Interior Health tapped Hut 8 in June for high-performance computing services. Revenue stemming from that deal was set to start coming in this quarter, <a href="https://blockworks.co/news/hut8-mining-q2-earnings-revenue">executives previously said</a>.&nbsp;



“There is a clear opportunity to leverage our capabilities across the data center infrastructure and software value chain to build a presence in nascent markets like AI infrastructure and compute,” Ho told Blockworks in an email.&nbsp;



The company is not the only one doubling down on artificial intelligence. <a href="https://blockworks.co/news/hive-blockchain-ai-rebrand">Hive Digital Technologies rebranded in July</a> to reflect its use of Nvidia graphics processing unit (GPU) chips that the firm called “a vital tool” for AI, machine learning and advanced data analysis.&nbsp;



Bit Digital more recently <a href="https://blockworks.co/news/ai-bitcoin-mining-revenue">launched an AI-focused business unit</a> amid the broader trend of <a href="https://blockworks.co/news/bitcoin-miners-ai-computing">crypto miners seeking new revenue streams</a>.&nbsp;



<h2 class="wp-block-heading">A big move before the halving</h2>



Hut 8 CEO Jaime Leverton, in a statement, called the merger “the largest M&amp;A transaction that has ever transpired within our industry.”&nbsp;



The new-look crypto miner now has 7.5 exahashes per second (EH/s) of installed self-mining capacity at six sites across Canada, New York, Nebraska and Texas.&nbsp;



It still trails large North American competitors Marathon Digital and Riot Platforms, which had energized hash rates of 19.2 EH/s and 11.7 EH/s, respectively, as of Oct. 31.&nbsp;



“The combined company will be not only one of the top 10 in terms of bitcoin production but also one of the most diversified bitcoin mining operations, including self-mining, hosting, power generation and high-performance computing services,” BlocksBridge Consulting founder Nishant Sharma said <a href="https://blockworks.co/news/hut8-merger-usbtc-closing-soon">just before the deal closed</a>.



Read more: <a href="https://blockworks.co/news/hut-8-mining-merger-us-bitcoin-corp#">A deeper look at Hut 8’s imminent merge with US Bitcoin Corp</a>



The merged firm indeed has more revenue streams as well as “uncorrelated fiat-based business units,” Leverton said during a Monday call with analysts.&nbsp;&nbsp;&nbsp;



Hut 8 has increased its fiat-based revenue from roughly 19% — for the 12 months ended June 2023 — to about 30%, the CEO added.



“Both sides of our business also have a strong track record of forging blue-chip growth partnerships to scale both rapidly and cost-effectively as we’ve done with our joint venture at King Mountain, Texas — and as we’re planning to do with our stalking horse <a href="https://www.prnewswire.com/news-releases/hut-8-receives-court-approval-for-a-stalking-horse-bid-for-four-natural-gas-power-plants-and-the-north-bay-bitcoin-mine-301976734.html">bid</a> for four energy sites in Ontario,” Leverton said.&nbsp;



New Hut will manage 220 megawatts (MW) of hosting infrastructure at its King Mountain site in Texas and 680 MW of energy under its managed services division — a unit that helps mining sites owners with operations via management software.&nbsp;



Competition among large miners is heating up ahead of <a href="https://blockworks.co/news/anniversary-of-2016-btc-halving">the next bitcoin halving </a>— an event slated for April that industry watchers expect could separate winners and losers in the space.&nbsp;



<a href="https://blockworks.co/news/riot-plots-hash-rate-growth">Riot Platforms’ latest deal with MicroBT</a> could lead to the company growing its hash rate to more than 100 EH/s over the long term. Bitfarms also recently bought more miners as part of “a transformative fleet upgrade plan,” while Marathon Digital  <a href="https://blockworks.co/news/marathon-mining-bitcoin-halving">continues to expand geographically</a> and diversify its mining methods.



“Our immediate goal is to drive operational synergies and optimize returns across our existing infrastructure platform,” Ho told Blockworks. “At the same time, we continue to monitor opportunities for both organic and inorganic growth.”



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New-look Hut 8 eyes AI-related opportunities after merger

Corey Wilton

Web3 gaming can take inspiration from esports economics — and improve on it with SocialFi.



If the swift rise and equally precipitous fall of token prices in Web3 play-to-earn games like Axie Infinity and Pegaxy proved anything, it’s that the traditional P2E token models do not work. Relying heavily on a continuous stream of new users for growth, even when P2E tokens stage large rallies, they inevitably drop — and <a href="https://coinmarketcap.com/currencies/smooth-love-potion/">struggle to recover</a>.&nbsp;



We can’t build the future of Web3 games on broken token models. But we can look to esports&nbsp; and extend the success of its economics by blending it with a Web3 innovation — SocialFi.&nbsp;



To create Web3 economies that will stand the test of time, we must rethink how they produce returns. Instead of creating models that rely on attracting new players, we can monetize the relationships players have with one another already; and in doing so, give more people the opportunity to participate in these economies. In other words, Web3 games don’t need P2E. They need SocialFi.&nbsp;



For the uninitiated, “SocialFi” refers to the use of blockchain tech to monetize social interactions — one of the most talked about trends in blockchain this year.&nbsp;&nbsp;



The world was introduced to SocialFi in a big way in August, when Friend.tech — a social token platform that lets users make money from the digital communities they build — burst <a href="https://blockworks.co/news/friend-tech-financialization-goldentre">onto the scene</a>.



Despite the fanfare, Friend.tech wasn’t the first attempt to merge blockchain with social relationships. Decentralized social media has made it possible for creators to monetize their content for years. But Friend.tech was the first social platform to introduce a model that monetized relationships rather than content: A novel approach that initially garnered a significant user base and feverish media attention.&nbsp;



Since then, the platform’s popularity has fluctuated, along with public opinion about the likelihood of its long-term viability. An early surge in transactions gave way to a <a href="https://blockworks.co/news/web3-cryptopunks-nfts-socialfi">steep fall</a> just weeks after its debut, and it has faced criticism for its dependence on social and para-social relationships formed outside its own ecosystem.



But love it or hate it, Friend.tech did prove something important: That decentralized, token-based systems can effectively monetize our connections with one another.



<h2 class="wp-block-heading">Building SocialFi rails for the gaming ecosystem</h2>



So, what does this new social phenomenon have to do with esports and the Web3 gaming world?&nbsp;



Friend.tech <a href="https://blockworks.co/news/friendtech-downturn-socialfi">is struggling</a> because it did not start life with its own social ecosystem. Instead, it siphoned off the connections people had formed on separate platforms, such as X. But gaming ecosystems come with the crucial missing component for successful SocialFi already installed: Community.&nbsp;



Relationships have been critical to many of the world’s most popular games for years. In both Web2 and Web3, team systems boost player retention and expand gameplay options for studios and players. In esports, teams and fans engage in a familiar economic dance: Fans support teams through merchandise, ticket sales and viewership, while teams provide entertainment and community. And in blockchain games, community plays what is arguably an even more crucial role. Players in Web3 games rely on one another to boost earning potential — most commonly, through guilds: Groups of players that team up to share resources, train new players and earn rewards.



These community elements in games are precisely where the mechanics of SocialFi can be applied. The SocialFi rails that monetize social and para-social relationships in Friend.tech could be used to do the same for guild communities in SocialFi for games. Just as people buy “keys” to connect with others on Friend.tech (and sell them, potentially for a profit), players could buy and sell guild memberships.&nbsp;



It doesn&#8217;t end there: SocialFi for games could also open up game economies for people who don’t play or even directly interact with games. In addition to the seats players buy in guilds, anyone could purchase a “fraction” of the guilds they want to support.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/blockchain-gaming-gamers">Hey gamers, blockchain isn’t that bad</a>



We have FinTech and now Friend.tech, and I call these new gaming mechanisms “GuildTech.” As guilds earn rewards, its fraction owners could also receive a portion of those, or choose to buy and sell more fractions as speculative tools.



I believe this kind of infrastructure has the power to create blockchain game economies that last and that SocialFi will inevitably become a crucial element of blockchain games. By allowing a broader swathe of users to reap rewards from Web3 games, adding these rails will attract a whole new population of participants — not only new players, but an army of engaged supporters and stakeholders, too.



That’s why the fusion of SocialFi and gaming is not just a fleeting trend: It’s the key to unlocking untapped potential and ensuring a strong future.&nbsp;



I urge developers, industry leaders and the broader crypto community to take inspiration from esports and delve deeper into the possibilities that SocialFi presents. Let&#8217;s collaboratively shape an era where gaming isn&#8217;t just about play, but also about forging beneficial connections with one another.&nbsp;



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<div class="wp-block-post-author-biography">Corey Wilton is the co-founder and CEO of Mirai Labs, a leading international Web3 gaming studio headquartered in Vietnam. Mirai Labs’ first release, Pegaxy, was recognized as the second-most popular crypto project in the Philippines in 2022.</div>


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Play-to-earn as we know it is dead: Long live SocialFi

Macauley Peterson

Using blockchain in finance to establish more efficient markets is one of the technology&#8217;s most logical applications. Whether you call it decentralized finance, open finance, or simply crypto, there are benefits to its enhanced transparency, automated accounting and reduced counterparty risk.



The trillion-dollar question is, where are the apps to onboard the masses?



Heron Finance, an US Securities and Exchange Commission-registered investment advisor (RIA), is swooping in to provide investors with a robo-advisor for private credit markets via the Goldfinch protocol, both of which are developed by Warbler Labs.



It’s a bid to democratize access to an asset class previously reserved for high net-worth individuals able to foot the high minimum investment amounts.



Heron’s approach is aimed at individual investors of all sizes. While Heron has not yet launched, Goldfinch, an open-source lending system, has facilitated over $110 million in loans across more than 20 countries in its three-year history.



Read more: <a href="https://blockworks.co/news/undercollateralized-lending-wildcat">Is ‘hands-off’ undercollateralized lending possible? Wildcat thinks so</a>



Warbler Labs co-founders Mike Sall and Blake West have previously proffered the “crazy” idea that all private debt will move to crypto rails.



“Eventually, for people running companies, it will seem silly to get a loan from a private bank rather than a crypto protocol,” Sall <a href="https://gov.goldfinch.finance/t/gip-06-proposed-goldfinch-roadmap/825">wrote</a> in 2022. “Going to a bank will be like bartering your goods with your neighbors instead of using the internet to sell them online.”



The recent &#8220;Blueprint for Goldfinch&#8221; proposal, known as <a href="https://gov.goldfinch.finance/t/grc-02-a-blueprint-for-goldfinch/1881">GRC-02</a>, outlines a strategic plan to transform Goldfinch into an extensive ecosystem for on-chain lending businesses. This strategy aims to capitalize on the $1.4 trillion private credit market with a crypto edge, to make the market more open, interoperable and liquid.



Heron Finance is a reflection of that blueprint. Its clients will select an investment strategy that aligns with their risk tolerance and objectives. The platform then constructs a diversified portfolio of private credit deals, ensures ongoing rebalancing, and pays out a steady monthly yield — projected to fall in the range of 11-16% annually.



Read more: <a href="https://blockworks.co/news/cryptocurrency-investment-bull-market">Investor rush into crypto products the largest since 2021 bull market high</a>



The team behind Heron created the first non-fungible token (<a href="https://blockworks.co/tag/%20nfts">NFT</a>) for compliance with know-your-customer (<a href="https://blockworks.co/tag/kyc">KYC</a>) requirements in 2021, Sall said in a statement. This has culminated in Heron becoming the first SEC-registered robo-advisor primarily focused on private credit.



West pointed to the company&#8217;s commitment to transparency and cost-effectiveness.



&#8220;We built Heron Finance on the open-source, blockchain-based Goldfinch protocol because we believe investors deserve better transparency and costs compared to traditional finance,&#8221; he said.



The launch comes alongside an anticipated boom in the private credit sector, driven by macroeconomic and regulatory tailwinds, Sall said, citing Morgan Stanley <a href="https://www.morganstanley.com/ideas/private-credit-outlook-considerations">analysis</a> projecting the private credit market will grow from $1.4 trillion in 2023 to $2.3 trillion over the next four years.



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Warbler Labs dogfooding its Goldfinch protocol with Heron Finance

Casey Wagner

Bitcoin soared past $43,000 Tuesday afternoon, extending a rally some crypto analysts say is just the beginning.&nbsp;



Bitcoin is up more than 160% year to date. It hit highs on Tuesday not seen since April 2022, rallying close to 4% in 24 hours. Ether (<a href="https://blockworks.co/price/eth">ETH</a>) similarly posted gains of close to 3%, moving the price to just under $2,300, also a level not hit since April 2022. 



“[Bitcoin] dominance has risen as Bitcoin has strengthened its position as a global macro asset and demand for alternative stores of value has increased,” Hal Press, founder and CEO of North Rock Digital, wrote in a recent market outlook. “Demand has been mainly driven by [bitcoin] <a href="https://blockworks.co/price/btc">BTC’s</a> more consistent price performance as a [store of value] as well as broader regulatory clarity due to an expected US spot BTC ETF approval.”



Analysts from crypto analytics and trading platform altFINS agreed that ongoing ETF optimism and <a href="https://blockworks.co/bitcoin-etf">increased institutional adoption</a> is a driving force for this rally, but global macroeconomic trends will be important to watch.&nbsp;



Read more: <a href="https://blockworks.co/news/bitcoin-ether-trading-stock-markets">Crypto stocks are riding the spot bitcoin ETF wave</a>



“The global inflationary surge is quickly easing, with [the] Eurozone leading the way. It&nbsp; would&nbsp; be however premature to conclude with confidence that the Central&nbsp; banks had won the fight against high inflation and that they are now ready to ease,” altFINS analysts said Tuesday. “The market expects they will start cutting rates as soon as March 2024, however, they might be reluctant to signal such moves yet.”



The Federal Reserve is scheduled to release its next interest rate decision next week. According to data from <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html">CME Group</a>, traders are all but certain the central bank will opt to keep rates exactly where they are.&nbsp;



Risk assets will continue to shift based on future policy, too. Analysts are also calling for interest rates to drop from their current level of 5.25% to around 4% by the end of 2024, though some economists say this is wishful thinking.&nbsp;



“Keep in mind, late last week the market priced in a year-end 2024 fed funds rate of just over 4% meaning well more than 100 basis points of easing next year,” Tom Essaye, founder of Sevens Report Research, said. “That’s very aggressive given Fed commentary and current growth/inflation.”



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Bitcoin surpasses $43k, analysts say it’s just the beginning 

Since its 2019 launch, the Helium Network has used tokens to reward individuals deploying nodes via its growing decentralized wireless network. On Tuesday, the network’s developer announced that users throughout the US can now tap into unlimited data, talk and text for $20 per month through cell service provided by Helium Mobile in tandem with T-Mobile.&nbsp;



Nova Labs, the company behind the Helium Network, has been building to the nationwide phone plan launch since partnering with T-Mobile in Sep. 2022. But the milestone comes with the question of how Nova Labs can generate revenue from the <a href="https://blockworks.co/news/where-is-the-revenue-helium-investors-inquire">notoriously unprofitable Helium Network</a>.&nbsp;



The Helium Network is designed for individuals to run hotspot nodes from their homes or businesses in exchange for rewards paid out in Solana-based MOBILE tokens. Currently, Nova Labs offers a hybrid cell service where users connect via its decentralized network, and T-Mobile takes over anytime Helium hotspots can’t provide coverage.&nbsp;



Read more: <a href="https://blockworks.co/news/for-5-a-month-crypto-now-has-your-cell-plan-covered">For $5 a month, crypto now has your cell plan covered</a>



T-Mobile charges for the backup coverage, so Nova Labs has a strong incentive to grow its hotspot network. The company has its work cut out for itself however: Helium coverage is strongest in major cities, and even then, the node network is currently spotty.&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1166" height="720" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=1024&amp;h=1024" alt="" class="wp-image-75002" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=1166 1166w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=416 416w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=423 423w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=355 355w, https://blockworks-co.imgix.net/wp-content/uploads/2023/12/Screenshot-2023-12-04-at-5.14.43-PM.png?w=80 80w" sizes="(max-width: 1166px) 100vw, 1166px" /><figcaption class="wp-element-caption">Helium Mobile coverage in New York City (Source: Helium Mobile Coverage Planner)</figcaption></figure>



Nova Labs isn’t aiming to blanket the US in cellular coverage though, according to Boris Renski, general manager of wireless at Nova Labs.&nbsp;



“All we need is to cover 3% or even less of the geographic area where data is used the most and this will result in more than 50% of the T-Mobile traffic actually shifting to the Helium network,” Renski said.&nbsp;



Blockworks previously reported that Nova Labs applied similar logic to its cellular network deployment in Miami. There, plans are currently $5 per month, and the company loses money on every new subscriber. The Helium Network pays out <a href="https://blog.hellohelium.com/boosted-locations/">boosted</a> rewards to coverage providers in high-traffic areas in Florida.



Though more expensive than in Miami, the nationwide price of $20 per month still makes the Helium Mobile phone plan much less expensive than what legacy cell carriers charge. Unlimited plans from T-Mobile, Nova Labs’ partner, <a href="https://www.t-mobile.com/cell-phone-plans">start</a> at $60 per month.&nbsp;



Renski said the discounted price is sustainable because the Helium Network’s bottom-up approach mitigates much of the overhead involved with building a cellular network. Helium hotspot owners offer their own real estate and coverage, so Nova Labs doesn’t have to buy land and pay radio installation companies to put up cell towers, Renski said.



Nova Labs will also begin selling outdoor mobile hotspots, priced at $499 apiece. <a href="https://blockworks.co/news/helium-miami-tmobile-hotspots-network-cellular">The company released $249 indoor hotspots</a> in October.



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Unlimited Helium Mobile cell plan goes nationwide for $20 a month

The Federal Reserve Bank of Boston wants to hire a senior software engineer focused on digital currency.&nbsp;



The LinkedIn posting states that the position would “support the Federal Reserve System’s Central Bank Digital Currency (CBDC) Research and Development program.”



The engineer would head up a team focused on the CBDC research and “prototyping.”&nbsp;



“This position offers a unique opportunity to be part of a world-class team working on cutting edge technologies related to CBDC R&amp;D. You will participate in a dynamic work environment that has the feel of a startup while also maintaining the benefits of a larger organization,” the <a href="https://www.linkedin.com/jobs/view/senior-software-engineer-digital-currency-at-federal-reserve-bank-of-boston-3752367154?refId=TFb0Y%2BB8zjnKyMWOR0YDEQ%3D%3D&amp;trackingId=3mU71eOEW6c5uzzKl3HBNQ%3D%3D&amp;position=4&amp;pageNum=1&amp;trk=public_jobs_jserp-result_search-card">listing</a> said.



The Boston branch of the US central bank is exploring how a <a href="https://blockworks.co/tag/cbdc">CBDC</a> could be implemented and what would be needed to roll one out. However, the Fed has not yet committed to a CBDC.&nbsp;



Read more: <a href="https://blockworks.co/news/federal-reserve-cbdc-tokenization-stablecoins">Fed official: Stablecoins pose a threat, but could present innovative opportunities</a>



In fact, the US remains unsure about CBDCs, with some lawmakers on Capitol Hill arguing that privacy is a concern. It’s a sticking point that isn’t just a worry for the US government either — <a href="https://blockworks.co/news/uk-undecided-on-cbdcs">the UK and other nations are researching</a> how privacy could be safeguarded in any CBDC rollout.



Even RBC Wealth Management <a href="https://blockworks.co/news/rbc-report-cbdc-risk">published a report on privacy</a> earlier this year.&nbsp;



In September, US Rep. Warren Davidson, R-Ohio, said that a poorly structured money system is “perhaps the biggest existential threat to Western civilization.”



Earlier this year, Republicans brought forth a Central Bank Digital Currency Anti-Surveillance State Act which aims to prevent the Fed from directly offering a CBDC to individuals. Democrats — including Rep. Maxine Waters, D-CA., <a href="https://blockworks.co/news/maxine-waters-cbdc-bill-anti-innovation-republicans">have spoken out against the bill</a>.&nbsp;



Waters warned that the bill could impede the Fed’s research into a CBDC.



The proposed legislation is clearly not stopping the Fed from proceeding with its research into a possible digital dollar currently. Michael Barr, Vice Chair of Supervision at the Fed, said in October that while the <a href="https://blockworks.co/news/federal-reserve-cbdc-stablecoins">central bank is no closer to making a decision</a> on a CBDC, it continues to research potential systems.&nbsp;



“The research is currently focused on end-to-end system architecture, such as how ledgers that record ownership of and transactions in digital assets are maintained, secured and verified, as well as tokenization and custody models,” Barr said at the time.



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Boston Fed seeks software engineer for CBDC research

The Bank of Italy and the Bank of Korea signed a Memorandum of Understanding on Tuesday.



The MOU will allow for the two central banks to share “knowledge and information on the topics of ICT technologies in support of real time settlement systems and the central bank digital currency (CBDC),” according to a <a href="https://www.bancaditalia.it/media/notizia/protocollo-d-intesa-tra-la-banca-d-italia-e-la-bank-of-korea-in-materia-di-it-e-sistemi-di-pagamento/?dotcache=refresh">press release</a> from the Bank of Italy.&nbsp;



This isn’t the first time that the two have collaborated with each other on CBDCs. Back in June, both the banks of Korea and Italy partnered with the Monetary Authority of Singapore and the International Monetary Fund on a <a href="https://blockworks.co/news/singapore-imf-cbdc-banks">paper focused on purpose-bound money</a>. PBM allows money to be programmed to be used for a specific purpose.&nbsp;



The central banks sought to ensure that PBM wouldn’t come “at the expense of digital money’s ability to serve as a medium of exchange.”



Read more: <a href="https://blockworks.co/news/singapore-live-cbdc-soon">Singapore plots ‘live’ wholesale CBDC pilot for next year</a>



The Bank of Korea announced in October that it would test a wholesale <a href="https://blockworks.co/tag/cbdc">CBDC</a> in partnership with the Bank of International Settlements. The goal, the Bank of Korea said at the time, is to see if wholesale CBDCs are suitable to be used as a settlement asset for tokenized bank deposits.&nbsp;



“This test is expected to lay the foundation for implementing a variety of innovative payment and financial services that are differentiated from existing services by presenting a pilot model of future currency infrastructure that reflects the development of IT technology,” a translated version of the <a href="https://www.bok.or.kr/portal/bbs/P0000559/view.do?nttId=10079835&amp;menuNo=200690&amp;pageIndex=">press release</a> said.



The pilot program does not signify that Korea plans to implement a CBDC, however. The purpose is just to explore CBDC design models to find one that’s possibly suitable, the Bank of Korea added.



Korea wrapped its first phase of a <a href="https://blockworks.co/news/koreas-central-bank-completes-first-phase-of-cbdc-simulation-test-run">CBDC research simulation project</a> back in January 2022.&nbsp;



The Bank of Italy published a <a href="https://www.bancaditalia.it/pubblicazioni/temi-discussione/2023/2023-1416/index.html?com.dotmarketing.htmlpage.language=1">paper</a> back in July focusing on the impacts that a CBDC could have on “choices of residents in a small open economy.”



It sought to “analyze the consequences on the banking system and on economic activity of an increase in the preference for the foreign CBDC, to the detriment of that for domestic currency and deposits.”



The central bank also launched an <a href="https://www.bancaditalia.it/focus/milano-hub/index.html?com.dotmarketing.htmlpage.language=1">initiative</a> to help financial institutions explore tokenized assets, tapping Polygon Labs and Fireblocks back in July. The project will help institutions experiment with security tokens through transactions using DeFi in a regulated environment.



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Banks of Italy, Korea will share CBDC knowledge under new memorandum

Bessie Liu

The foundation supporting Cosmos-based cross-chain smart contract platform Neutron will acquire 25% of Confio, the software development company behind CosmWasm, the default virtual machine in the Cosmos ecosystem.



This acquisition is intended to drive technological improvements to the CosmWasm virtual machine and improve its performance, security and interoperability.&nbsp;



Confio, a German GmbH corporation, will sell 25% equity of its shares in this strategic investment.&nbsp;



According to Avril Dutheil, a core contributor of Neutron, the investment is being made by the Neutron Foundation in cash as part of its mandate to ensure the long-term growth and development of the network. It did not require a vote from NTRN token holders.



<h2 class="wp-block-heading">Mergers and acquisitions in the Cosmos</h2>



The announcement of Neutron’s acquisition of Confio comes just a day after other Cosmos chains, Osmosis and Umee, revealed that they would be <a href="https://blockworks.co/news/cosmos-dex-osmosis-merger-umee">merging</a>, and only weeks after staking network Stride had <a href="https://blockworks.co/news/stride-merge-cosmos-hub-network">shared plans</a> that it wanted to become part of the Cosmos Hub.&nbsp;



Although Stride’s plans did not ultimately come <a href="https://blockworks.co/news/stride-atom-token-conversion">to fruition</a>, it is evident that there has been a growing uptick of mergers and acquisitions in the Cosmos ecosystem, which Dutheil believes is “a period of consolidation.”



Dutheil notes that the Cosmos ecosystem has grown “far and wide, with perhaps not enough thought given to the cost of running a full app chain at scale, long term.”



He draws on examples of tokenomic inflation, where app chains pay for security provided by validators through token emissions, inflating the supply, and poor user experiences such as asynchrony and bridging, as examples of repercussions of the current model.



The Cosmos Hub community recently passed a proposal to <a href="https://blockworks.co/news/cosmos-fork-jae-kwon">limit ATOM inflation by adjusting the maximum inflation rate from 14% to 10%</a>, which may encourage chains linked to the Cosmos Hub to take a fresh look at their tokenomics as well.&nbsp;



“Projects are looking to consolidate with partners that share their vision to pool resources and focus and support deep integrations to take their projects to the next stages of growth and adoption,” Dutheil said.



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Neutron to acquire 25% of CosmWasm developer Confio

Developers have a new way to build social logins into blockchain applications following a partnership between smart contract wallet Safe and Web3Auth.



The tool, SafeAuth, combines Web3Auth’s social login technology with Safe’s Account Abstraction software development kit (SDK)&nbsp;



Smart accounts were introduced via the ERC-4337 standard, built to improve the general Ethereum user experience through more intuitive and customizable crypto wallets.



SafeAuth enables users to set up smart wallets using an existing email address, removing the need to remember lengthy seed phrases.&nbsp;



These smart accounts will also be interoperable, meaning that users will be able to link and interact with different blockchain applications through a single smart account.&nbsp;



The ERC-4337 standard was deployed to Ethereum mainnet in March and <a href="https://blockworks.co/news/ethereum-smart-account-adoption-proposal">data shows</a> adoption has remained relatively slow, with weekly retention of smart wallets that use ERC-4337 dropping to as low as 1% for accounts older than five weeks.&nbsp;



Lukas Schor, a Safe co-founder, told Blockworks this should not be surprising as adoption often takes longer than people wish.&nbsp;



“The ERC-4337 standard is still in ‘draft mode’ and occasional changes … are still happening, making it harder for in-production solutions to adopt it,” Schor said.&nbsp;



Schor said that ERC-4337 also introduced additional smart contract risk, meaning it may take time for larger applications and wallets to opt in.



“Currently, the primary use-case for ERC-4337 is sponsored transactions for ‘free NFT drops’ or similar applications; we are still missing applications to leverage more complex features of accounts abstraction like recovery or sessions keys,” he said.



Read more: <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">Ethereum’s ERC-4337 Account Abstraction Smart Contract is Live</a>



Tobias Schubotz, Safe’s product lead, shared optimism about the future of smart accounts. He said Safe itself has seen a 201% increase in monthly average users, now totaling more than 376,000.&nbsp;



“This indicates that Safe is being adopted faster than the overall crypto space, suggesting a growing interest and potential for smart accounts in the broader blockchain ecosystem,” Schubotz said.



“At the core of this solution is adaptability, users can choose additional authentication, such as multiple email addresses, as they deem necessary,” he said. “Similar to how one might employ a social login or email for various online platforms, SafeAuth offers a unified access method.”



Schubotz added that developer tooling such as SafeAuth can also assist in increasing the adoption of smart account standards such as ERC-4337.&nbsp;



“By offering an SDK that enables developers to seamlessly integrate a social login feature into their platform, Safe is further encouraging the adoption of smart accounts,” he said.&nbsp;



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Safe wants Ethereum users to create wallets with emails — not seed phrases

Wildcat, a lending protocol that has recently landed on Ethereum mainnet, wants to make undercollateralized lending more ‘hands-off.’



The promise of uncollateralized lending is to enable credit and money expansion while remaining decentralized.



In an <a href="https://twitter.com/WildcatFi/status/1730375186631794921">X post</a> revealing its mainnet launch, the Wildcat Protocol notes that existing processes around Web3 undercollateralized lending are too ‘hands-on’ with various responsibilities falling into the hands of protocols themselves.



Laurence Day, the founder of Wildcat, told Blockworks that often in DeFi, people talk about “don&#8217;t trust, verify” writ large and insist that all on-chain agreements must be overcollateralized for safety when the counterparty is pseudonymous.&nbsp;



Though this may be the case, there is also a general acceptance that large-scale agreements between entities that can operate in DeFi must have the necessary paperwork and be executed off-chain.&nbsp;



“We&#8217;ve hand-crafted a rod for our own backs when it comes to visibility into deals that are, on aggregate, much more systemically important than any one position on, say, Euler or Aave,” Day said, whose <a href="https://blockworks.co/news/blackmail-thwarts-90k-dao-attack">prior Web3 efforts include</a> the ill-fated Indexed Finance.



The name is an homage to the United States’ pre-central bank days in the 19th century, when so-called “<a href="https://www.aier.org/article/what-do-wildcat-banks-tell-us-about-stablecoins/">Wildcat banks</a>” issued their own private banknotes.



What the Wildcat Protocol hopes to achieve is to minimize the third-party oversight of the undercollateralized lending process, leaving lending and borrowing specifications predominately up to the borrowers and creditors themselves.&nbsp;



According to its <a href="https://github.com/wildcat-finance/wildcat-whitepaper/blob/main/whitepaper_v1.0.pdf">whitepaper</a>, there will be four main components involved in the Wildcat protocol:&nbsp;



<ul>
<li>An Archcontroller contract monitored by the Wildcat team, responsible for overseeing borrower eligibility;</li>



<li>Market controller factories that oversee constraints that will be passed on to markets, including fees that must be paid to the protocol;</li>



<li>Market controllers, the set of rules deployed by individual borrowers into the market controller factories; and most importantly,</li>



<li>actual markets.&nbsp;</li>
</ul>



Markets are designed to publicly display which assets borrowers are looking for, at what maximum capacity, and at what annual percentage rate. Borrowers will also have the ability to choose their collateralization ratio, penalty rates and time frame in which they pay their penalties. They will also be able to choose who their lenders can be.&nbsp;



So, unlike the on-chain lending protocol Goldfinch, where borrowers must demonstrate if they are creditworthy through collective assessments, or Maple Finance, which offers borrowers uncollateralized lending at fixed rates, Wildcat simply exists to provide the necessary tools for an undercollateralized on-chain contract. It does not get involved in the lending and borrowing process itself.



“I think it&#8217;s important that we give borrowing entities and their counterparties enough freedom to come to their own terms without having to rely on delegates and middlemen dictating parameters. You might call it free banking, I call it the freedom to contract,” Day said.&nbsp;



Wildcat markets are not controlled nor upgraded by the protocol once it has been deployed. This means the market and its interactions belong to the borrower alone, and the protocol will not be able to liquidate collateral, freeze markets, or access any funds.&nbsp;



Lenders can not be forcibly removed from open positions unless they have been placed on a sanctions list. In the case that a ‘sentinel contract’ identifies a sanctioned user using <a href="https://blockworks.co/tag/chainalysis">Chainalysis</a> nodes, it will have the capability to revert transactions or withhold assets in an escrow contract.&nbsp;



If a borrower is sanctioned, the protocol has advised seeking legal advice. Noting that “existing reserves can be withdrawn from the market by lenders, but subsequent repayment of assets by the borrower could potentially incur strict liability offenses on the part of a lender.”&nbsp;



Ultimately, Wildcat is designed in a way that enables market participants to engage in undercollateralized lending by making their terms completely public, it will be available to users worldwide, except the United States.



Finding a solution to fractional reserve free banking is a tough nut to crack, but an important one, according to Evgeny Gaevoy, CEO at market maker Wintermute



“If we cannot solve it, I don’t think we can really have any ambition for Bitcoin or Ethereum or whatever-other-token-based economy,” he wrote in a <a href="https://evgenygaevoy.medium.com/wildcat-53603029ff32">blog</a> post. “‘Full reserve banking is static at best and stagnant at worst.”



And Day agrees.



“If we&#8217;re trying to create an alternative to the traditional financial system, we need to find the most suitable way to replicate its most powerful weapon. Wildcat is an iteration on that path: no more, no less,” Day said.



Macauley Peterson contributed reporting.



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Is ‘hands-off’ undercollateralized lending possible? Wildcat thinks so

Venture capital firm Heartcore Capital is investing in the crypto segment’s application layer protocols as part of a bet on technologies that foster user interaction with the space.



The Denmark-based company has raised 15 million euros ($16.3 million) for its first Web3 fund set to allocate to founders building upon crypto infrastructure Heartcore says is primed for wider adoption.&nbsp;



“We believe that the shift towards on-chain protocols is the next stage of the software revolution of the past three decades,” Heartcore partner Yacone Ghalim told Blockworks. “We foresee that protocols will progressively disrupt parts of our economy, like previous internet startups.”



While bitcoin has rallied for chunks of the year — <a href="https://blockworks.co/news/bitcoin-price-bull-market-compare">jumping to $42,000 Monday morning</a> — much of 2023 resembled a bear market following the collapse of crypto exchange FTX.



Ghalim said such market cycles have historically offered ideal entry points, noting that Coinbase, Ethereum, Maker and Uniswap were built in bear markets.&nbsp;&nbsp;



“Tourist investors and founders have left to seek greener pastures, the signal-noise ratio has dramatically improved, valuations are back to being reasonable, and expectations are in check,” he said of the market conditions.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-venture-capital-fundraise-q3">Crypto VC challenges persist, but Q3 brings hope with $1B raised</a>



Ghalim argued that it is increasingly possible to create Web3 user experiences on par with Web2 products. For example, he noted the ability for <a href="https://blockworks.co/tag/layer-1">layer-1s</a> and <a href="https://blockworks.co/tag/layer-2-2">layer-2s</a> to process thousands of transactions per second.



The infrastructure layer currently holds 98% of the industry’s $1.6 trillion market cap, according to Heartcore. <a href="https://blockworks.co/tag/uniswap">Uniswap</a> has historically been the only application layer protocol in the top 20. The market cap of Uniswap (<a href="https://blockworks.co/price/uni">UNI</a>) had fallen to 21st-highest on Monday — behind bitcoin cash (<a href="https://blockworks.co/price/bch">BCH</a>) at $4.5 billion.



Tech infrastructure players — including telecommunications, semiconductor and networking companies — were among the highest valued in the early 1990s. But Web2 applications layer firms such as Apple, Amazon, Microsoft, Alphabet, Meta and Netflix would ultimately build powerful businesses as value moved “up the stack,” Ghalim said.&nbsp;



The firm believes application layer protocols, from DeFi to gaming, are positioned to be winners in their respective categories.&nbsp;



“While history doesn&#8217;t always repeat, it often rhymes and we think the same is about to happen in crypto as the ‘fat protocol’ <a href="https://medium.com/ledgercapital/the-fat-protocol-thesis-debated-65ad56285fd5">theory</a> is outdated,” he added. “Web3 applications have demonstrated they have real moats, often stronger monetization models and will increasingly own part of their infrastructure.”



Founded in 2007, Heartcore has <a href="https://www.heartcore.com/companies">invested</a> in more than 100 Web2 companies.



The firm has ventured into the <a href="https://blockworks.co/tag/web3">Web3</a> space in recent years, backing teams at companies such as Panoptic, Elusiv, Li.Fi, Superform, Rhinestone, and MakerDAO.



Heartcore has also shown foresight in the cryptocurrency domain with private investments in Ethereum as early as 2014, and in projects like Polkadot and Cosmos in 2017.



Despite its shift towards Web3, the firm maintains its commitment to <a href="https://blockworks.co/tag/web2">Web2</a> technologies, and intends to continue investing in this area through its other vehicles.



“We don&#8217;t think that this is a case of overnight disruption and we believe that traditional companies and protocols will co-exist for decades to come,” Ghalim said.



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VC firm Heartcore expands focus to Web3 via app-focused fund

A Supreme Court case could change the way the US Securities and Exchange Commission and other federal agencies bring enforcement actions — but legal experts warn the crypto industry not to hold its breath.&nbsp;



Following a 2011 investigation, the SEC sued hedge fund founder George Jarkesy for securities fraud, allegeding he inflated asset prices to boost his own management fee. By the SEC’s choice, the case was an “administrative proceeding,” a non-judicial process overseen by an administrative law judge instead of a federal court.&nbsp;



In an appeal to the Fifth Circuit, Jarkesy argued the administrative proceeding violated the US Constitution’s seventh amendment by denying him a right to a trial by jury.&nbsp;



The appellate judge sided with Jarkesy. But the SEC maintains that seventh amendment rights only apply when private rights are at stake, not public.&nbsp;



Now, the case is in the hands of the <a href="https://www.supremecourt.gov/docket/docketfiles/html/public/22-859.html">Supreme Court</a>. Justices heard oral arguments at the end of November and their opinion is pending.&nbsp;



“If the Supreme Court determines that jury trials are required in all administrative matters, there would be a very widespread impact on all administrative agencies – and a corresponding big impact on the Federal courts which would have to absorb all of those cases,” said Sam Dibble, partner at Baker Botts.



Justices could opt to create a new process for determining which cases brought by federal agencies go to federal court versus administrative tribunal. As of now, the <a href="https://blockworks.co/tag/sec">SEC</a> has the power to decide the venue, which is supported by the 2010 Dodd Frank Act.&nbsp;



Other legal experts are less certain the Supreme Court case could materially change much — especially for the crypto industry, where most cases are already advanced in federal court.&nbsp;&nbsp;



Read more: <a href="https://blockworks.co/news/coinbase-supreme-court-victory">Coinbase walks away with Supreme Court victory in arbitration case</a>



“Some have suggested that Jarkesy might mark the end of the administrative state,” Andrew Kim, partner at Goodwin, said. “Such sentiments are hyperbolic, to say the least.&nbsp; And it’s quite clear now that Jarkesy isn’t going to deal a death blow to either the SEC or the administrative state writ large. Regardless of how Jarkesy comes out, an Article III court will usually remain available to the SEC for enforcement proceedings, so you will continue to see actions like Coinbase, Binance, Kraken, etc.”&nbsp;



The SEC’s cases against <a href="https://blockworks.co/news/sec-sues-coinbase">Coinbase</a>, <a href="https://blockworks.co/news/sec-allegations-against-binance">Binance</a> and <a href="https://blockworks.co/news/kraken-commingle-customer-funds">Kraken</a> are all currently playing out in federal district courts as opposed to administrative proceedings. But for settlements, which are also common in the crypto space, the Supreme Court cases could change things, Kim said.



Read more: <a href="https://blockworks.co/news/coinbase-binance-suits-different">‘Fundamental Difference’ between SEC’s Binance and Coinbase suits</a>



“Historically, the SEC has used administrative proceedings to finalize settlements with private parties,” Kim said. “In a post-Jarkesy world, the SEC may well have to go to an Article III court, which can exercise independent discretion, every single time it wants to settle a potential enforcement action and extract civil money penalties as part of the agreed-upon resolution.”&nbsp;



Article III court judges — i.e. federal judges — could easily approve consent orders for settlements, or “some may decide to put the SEC through the ringer,” Kim said. 



“While Jarkesy won’t mark the end of the SEC or the modern federal administrative state, whatever the Court decides will be in line with a consistent theme of limiting the reach of the federal government and providing a check against the Executive Branch,” he added. “You’ll see a lot more of that this term.”



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The US Supreme Court could reshape the SEC’s powers — and how the agency approaches crypto

The Internal Revenue Service’s Criminal Investigations Unit is seeing an increase in its caseload of crypto tax cases, according to Bloomberg.



Bloomberg cited a reporter&#8217;s call with division head Jim Lee, during which he <a href="https://www.bloomberg.com/news/articles/2023-12-04/irs-criminal-investigation-unit-taking-on-more-crypto-tax-cases">disclosed</a> that the investigations range from failures to report capital gains to purposeful withholdings of crypto ownership disclosures.&nbsp;



Three years ago, Lee reportedly said the majority of cases were focused on money laundering. Now, roughly half are tax related.



The tax agency’s investigations unit was just one of the agencies aiding in the Binance probe, which led to a $4 billion settlement. 



Read more: <a href="https://blockworks.co/news/binance-changpeng-zhao-deal-unpacked">Here are the details of Binance and Changpeng Zhao’s plea deal</a>



As part of the settlement, Binance not only agreed to pay the billion-dollar sum but the exchange also pleaded guilty to the failure to comply with registration requirements and operating as an unlicensed money transmitting business. 



Former <a href="https://blockworks.co/news/changpeng-zhao-announces-resignation-binance">CEO Changpeng Zhao pleaded guilty</a> to violating anti-money laundering violations. He has, as part of the settlement, resigned from his role as CEO and faces a February sentencing.



The company <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">still faces a lawsuit from the US Securities and Exchange Commission</a> alleging that it commingled funds and offered unregistered securities.&nbsp;



“Our team of investigators uncovered that <a href="https://blockworks.co/tag/binance">Binance</a> disregarded anti-money laundering [know-your-customer] laws, failed to register as a money transmitter, and willfully violated US sanctions tied to the International Emergency Economic Powers Act,” Lee <a href="https://www.irs.gov/compliance/criminal-investigation/binance-and-ceo-plead-guilty-to-federal-charges-in-4-billion-resolution">said</a> in November following the settlement announcement.



Aside from the investigations, the <a href="https://blockworks.co/tag/irs">IRS</a> is currently working out its crypto framework. In October, it <a href="https://blockworks.co/news/irs-treasury-crypto-reporting-requirements">extended its tax rule comment period</a> following lots of public feedback. Coinbase weighed in on the proposed rules, with its head of tax criticizing the proposed rules.&nbsp;



“The proposed regulations, as written, would impose an incomprehensible and unduly burdensome set of new reporting requirements,” Coinbase’s Lawrence Zlatkin <a href="https://blockworks.co/news/coinbase-irs-crypto-tax-rules">wrote at the time</a>. 



Lawmakers on Capitol Hill <a href="https://blockworks.co/news/us-irs-to-crypto-tax-rules">pushed the agency to speed up its crypto tax rules</a>, which were first introduced back in August.



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